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08 Jul 2014

India gets upwardly mobile

Tarun Balram

by Tarun Balram

Head of Capital Financing, HSBC India

India gets upwardly mobile

Indian farmers can get up-to-date information about food prices on their mobiles

The internet was considered a luxury in India 10 years ago. But because of the increasing use of mobile phones, the country’s digital economy is being transformed.

Cheaper smartphones and a fast-growing telecommunications industry are leading to significant changes. India has an estimated 243 million internet users – more than the US and second only to China*. They are bypassing traditional desktop technology. Facebook, the world’s biggest social networking site, says that it has more than 100 million users in India, of which nearly 84 million access the site through mobile phones. This suggests the rise of a “mobile-first” generation of internet users.

India has an estimated 243 million internet users – more than the US and second only to China

India is getting richer and phones are getting cheaper. Domestic producers are now offering smartphones for as little as USD70, and have secured a significant proportion of the market. They are selling handsets in villages so remote that even basic necessities such as access to safe drinking water are a major challenge.

The lack of a high-speed broadband network and the cost of computers have hampered the reach of the internet in India. In addition, the strength of the country’s traditional media means that many people continue to rely on newspapers and TV for information and entertainment rather than seeking out digital content.

However, with access to high-speed mobile data services spreading, that is changing. India’s internet contribution to GDP could increase from 1.6 per cent in 2012 to between 2.8 per cent and 3.3 per cent by 2015, according to McKinsey.

The widespread use of English on Indian websites has made it easier for global companies to enter the market, giving consumers a wider choice of applications and boosting local app developers and technology start-ups.

The growth of the local online industry is being supported by the return of talent from overseas. Indian-born engineers have played a key role in the success of Silicon Valley and many are now offering resources and expertise back home.

As more Indians start using the internet on phones, they are gaining access to new products and services. Booking a rail or plane ticket once involved hours of queueing. Today, the government’s railway ticketing website is the biggest e-commerce portal in the country.

Coaching classes and computer training institutes have developed online platforms for students who no longer need to travel to big cities for education or training. The internet can also help Indian farmers understand the movement of commodity prices by enabling them to get up-to-date information on their mobiles.

Overseas companies are also taking an interest in the opportunities India has to offer, particularly in retail, despite restrictions on foreign direct investment in the sector.

As more and more Indians access the internet, these shifts will gather momentum, changing the shape of the economy and helping to cut costs and improve choices for consumers.

*Estimates from the Internet and Mobile Association of India and IMRB International